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What is the purpose of the balance sheet in the final accounts?
What is the purpose of the balance sheet in the final accounts?
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Practice Questions
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Q1
What is the purpose of the balance sheet in the final accounts?
To show cash inflows and outflows
To summarize income and expenses
To present the financial position at a specific date
To calculate net profit
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The balance sheet presents the financial position of the sole trader at a specific date, showing assets, liabilities, and equity.
Questions & Step-by-step Solutions
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Q
Q: What is the purpose of the balance sheet in the final accounts?
Solution:
The balance sheet presents the financial position of the sole trader at a specific date, showing assets, liabilities, and equity.
Steps: 5
Show Steps
Step 1: Understand that a balance sheet is a financial statement.
Step 2: Know that it shows what a business owns (assets).
Step 3: Learn that it also shows what a business owes (liabilities).
Step 4: Recognize that the difference between assets and liabilities is called equity.
Step 5: Realize that the balance sheet is created at a specific date to show the financial position of the business at that time.
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